Why the Waymo-Uber Trial Matters to Tech

There’s no truth to the rumor that a concession stand was set up at the start of this week’s Waymo-Uber trial.

But it wasn’t such a far-fetched idea. Popcorn and cotton candy befit a court fight between two tech behemoths that has Silicon Valley buzzing.
Alphabet
(ticker: GOOGL) subsidiary Waymo claims ride-hailing giant Uber swiped thousands of trade secrets while covering it up.

Indeed, the civil trial has all the elements of a Hollywood blockbuster: The fate of the multibillion-dollar driverless vehicle market–not to mention an Uber initial public offering–may be in the balance in a federal court in San Francisco. The three-week trial, which started on Monday, promises a titillating look into the valley’s sharp-elbowed startup culture.

It also promises to feature plenty of star power: Google co-founders Larry Page and Sergey Brin, former Uber CEO Travis Kalanick and venture-capital titan Bill Gurley are all on the witness list. The Justice Department is conducting a separate criminal investigation, according to court filings.

“It is Silicon Valley’s trial of the century, when it comes to trade secrets,” said Jed Ferdinand, an intellectual-property attorney.

Waymo’s lawsuit, which seeks $1.8 billion in damages, alleges that Anthony Levandowski, a former Uber engineer who previously was a star engineer at Google, pilfered 14,000 “highly confidential” documents from Google, where he helped run its self-driving division, to start Otto, a company in the same field, in 2016. Uber quickly snapped up Otto for $680 million.

“We’re bringing this case because Uber is cheating,” Charles Verhoeven, Waymo’s lead lawyer, said in an opening statement Monday.

“Waymo wants you to believe that Anthony Levandowski got together with Uber as part of some grand conspiracy to cheat and take trade secrets,” Uber attorney Bill Carmody said later. Uber calls the lawsuit “baseless.”

Yet behind the glitzy facade, several philosophical arguments are in play. To start with, are engineers in the transitory world of tech free to take their talents elsewhere and build on what they learned at their previous employer? Are tech giants with vast amounts of cash too eager to sue to throttle competition? And will the result of such a high-profile case prompt more litigation over trade secrets in an industry that leans heavily on publicly filed patents?

“This case goes to the heart of the many problems that plague the system of protecting intellectual property,” said Paul Morinville, president of US Inventor, an organization of 13,000 independent inventors and startups that says it is educating Congress and the public on the patent system.

“Waymo kept the inventions as trade secrets instead of patenting them,” Morinville said. “Trade secrets give a perpetual monopoly on new technologies so long as the invention remains secret. Had Waymo patented their inventions none of this would be an issue.”

The often-delayed case goes to the root of what Silicon Valley companies will do to gain a competitive advantage. Charges of stolen trade secrets, missing files and suspicious hires are as much a part of valley lore as Steve Jobs and Mark Zuckerberg.
Apple
(AAPL) spent most of the last decade in court with Samsung (South Korea: 005930) jousting over smartphone patents.
Snap
(SNAP) accused Instagram of copying Snapchat Stories. In the 1990s, Apple vs.
Xerox
(XRX) and Apple vs.
Microsoft
(MSFT) centered on copyright infringement.

Ultimately, those cases dragged on for years through the appeals process and left both companies unsatisfied. A classic nontech example: The nearly decadelong dispute in which
Mattel
(MAT) argued that MGA Entertainment stole the idea for Bratz, the ethnically diverse, pouty-lipped toys. A former Mattel designer of the toys, Carter Bryant, was accused of taking the Bratz concept to MGA. A federal appeals court eventually sided with Mattel in early 2013.

The turnstile-like movement between competing companies, which actively recruit and poach talent from rivals, stokes accusations that lead to conflict in the tech sector, noted Judge William Alsup, who is overseeing the Waymo-Uber case, at a pretrial hearing. “Silicon Valley and the rest of the technical world out there in the United States is very interested to know how we balance these competing factors here,” he said.

The case “could set a standard for the valley on how people leave companies and start at others,” said Sandy Miller, general partner at IVP, a later-stage venture capital and growth equity firm with $7 billion of committed capital.

The job-hopping culture of Silicon Valley is protected by California employment law, which understands employee mobility is essential to innovation. But the same law does not apply to intellectual property, which can lead to disputes, as it has in Waymo-Uber.

Waymo contends that Uber’s LiDAR circuit board looks suspiciously like its own design. LiDAR (Light Detection and Ranging), which uses pulsating laser beams to measure the distance between objects, is essential in self-driving cars to identify pedestrians, other cars, bicyclists, driving lanes, and other things in its path.

The technology “is the very crux, core, of driverless,” said Ferdinand, the intellectual-property lawyer. “It means everything to Google, which has bet heavily on driverless cars.”

Uber has denied using proprietary Waymo technology.

The question for jurors is whether that evidence amounts to a trade secret? The rub is making the distinction between what an engineer learns on their own versus what constitutes the property of their former employer, technology and legal experts say.

“In general, trade secrets can be kept secret forever but they don’t have legal protection from reverse engineering,” said IP expert Chetan Sharma. Intellectual property, he added “that leads to a patent provides 20 years of protection, but [has] to be filed within one year of discovery.”

Just don’t expect to hear anything from Levandowski, who was fired from Uber last year for refusing to cooperate with investigators associated with the case. During a pretrial deposition in April, under questioning from Waymo attorneys, he declined to answer questions more than 300 times, citing constitutional protections against self-incrimination, according to a deposition transcript.

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